The smartphone wars: What Gassée has to say

This is interesting. Jean-Louis Gassée, former head of Be Inc. and now a venture capitalist, has spotted what may be another prong of Google’s strategy; break the carriers’ term-contract system by driving the price of smartphones so far down that customers don’t need or want a carrier subsidy.

Here’s what he says:

The great news is Google wants to disintermediate the carriers. How do they do that? By working with the Android army of manufacturers and targeting the $89 price point. Once there, carrier subsidies are no longer needed, consumers are free to move from one carrier to another as they get a better deal, or as they buy a new gadget without having to beg for an ETF (Early Termination Fee) exemption.

I’m not sure why Gassée thinks $89 is a magic price point, and this paragraph appears in a post labeled Science Fiction: Nokia goes Android, but no matter. Qualitatively, Gassée is certainly on to something.

There has to be some price point below which subsidies become unnecessary and the term-contract system collapses. It may not be $89, but it’s probably bracketed by $50 and $100. Maybe Google thinks the handset manufacturers really can push handset prices that low if the hardware people don’t have to pay for smartphone OS development. It may be right; the underlying question is probably whether smartphones have any components that aren’t following a Moore’s Law cost curve.

(Until recently, I would have said “Aha! The display!”. But it turns out the price of LCDs was being held artificially high by collusion among major manufacturers; the ring got busted in early 2009, and lawsuits are continuing.)

Well before we reach the point at which the term-contract system collapses, the declining bill-of-materials cost on a smartphone will put a hard squeeze on the amount carriers can afford to spend on software development – yet another strike against carrier skins. This reinforces my conclusion that the time when crippling Android with customizations remains a viable strategy is limited. It may be over already.

Gassée emphasizes an important fact that I first wrote about nearly two years ago, around the time the G-1 first shipped. The drama with Apple is in many ways a distraction; Google’s medium-term strategic goal is to break the cell-carrier oligopoly – smash their profit margins and commoditize their function. Gassée doesn’t note that longer-term than that they’ll have to take on the fiber/cable oligopoly as well, but he is certainly not stupid enough to have missed this.

Gassée has spent a lot of time thinking about which way Nokia’s going to jump once it becomes apparent that its software strategy is a fragmented mess. Like Piper Jaffray (and now me) he sees a move to Android as a strong possibility, but he raises another possibility. What if Stephen Elop, the Microsoft alumnus they’ve tapped as CEO opts for Windows Phone 7?

I don’t think it will happen. It would combine all the present business disadvantages of Android with the disadvantages of a closed-source codebase controlled by someone else. Nokia’s engineers would scream bloody murder, and Nokia’s stockholders would probably tar and feather Elop and ride him out of Finland on a rail.

Still, the possibility can’t be completely ruled out. Large companies have certainly done more blatantly self-destructive things before. The smartphone wars have been aspiring to the condition of low comedy ever since Steve Jobs said “You’re holding it wrong!”; a mad fling between Nokia and Microsoft would take them straight to opéra bouffe.

77 thoughts on “The smartphone wars: What Gassée has to say

  1. You’re moving closer to the truth.

    Apple and Google are, quite likely, (at the least, *were*) colluding in the destruction of the carriers. What better way for the carriers to not notice that they’re being attacked at both the high (Apple/iOS) and low (Android) ends?

    Jobs created a situation where AT&T needs the iPhone, while all other carriers need Android in order to respond.

    Elop may move to Windows Mobile 7, Microsoft might offer a sweetheart deal (free, or even support per unit, a la Dell and Intel) to Nokia. Such support could act as a in-place subsidy, making jlg’s predictions come true. Microsoft needs market share, and tipping over Nokia with Microsoft Windows Mobile 7 on every new Nokia phone would be one way to get there.

    Microsoft needs real market share for Windows Mobile 7. Market share attracts developers, and apps. You may not buy apps for your phone, but your aunt Tilly and your nieces and nephews will. These apps act to ‘stick’ customers to their platform.

  2. I just read an interesting article in PC Mag (ht slashdot.org.)

    Summary: Walmart is going to sell TMo bits. $45 pm unlimited text/talk. Buy packs of 100MB (price not given.) Users buy their own phone (inc Android option.)

    Translation: Walmart is going to be a bulk bit hauling service. Chopping off all the premium services that the carriers are desperately trying to hold on to. Or to put it another way: Walmart is doing what it always does, cutting the elite retailers down to size.

    Warning: for those of you with a social conscious, I need to warn you that Walmart is using low paid children in Vietnam to haul all these bits about. And they don’t even provide those kids any health insurance. Apparently there is no protection in place to prevent these kids from seeing bits that represent pictures of naked ladies. The disgrace! The humanity!

    As ever, I love Walmart.

  3. >Microsoft needs market share, and tipping over Nokia with Microsoft Windows Mobile 7 on every new Nokia phone would be one way to get there

    Well, sure. But you can’t polish a turd, and unless there’s been some sort of unprecedented miracle at Microsoft Windows Phone 7 is a turd. And I don’t just mean internally architecturally rotten in a way that only matters to geeks and people who track lifecycle IT costs, the way Windows 7 for the desktop is; I mean that unless that miracle has occurred Windows Phone 7 will be visibly broken. As in, crappy UI, unacceptable performance, and crash-prone-ness. If Nokia buys this it will be cutting its own throat.

    >These apps act to ’stick’ customers to their platform.

    Everybody thinks this is a truism, but I have become quite skeptical about it. Serious app developers write for iPhone and Android both; app availability simply does not seem to be an effective differentiator. and if Windows Phone 7 becomes a third major plaform developers will just port to it.

  4. >Summary: Walmart is going to sell TMo bits.

    Heh. I think I can hear the planners at the other carriers screaming from here.

  5. > Serious app developers write for iPhone and Android both;

    so what happens when a carrier, say, Verizon, decides to muck about with dalvik, such that only apps sold through the Verizon app store run on Verizon (android) phones?

    Android, being open source, is subject to just this type of ‘fork’. Its going to be much worse than the skinning crap fest on Android. Much worse.

  6. > Summary: Walmart is going to sell TMo bits.

    As a MVNO? Note that Best Buy is now a MVNO on Sprint’s network.

  7. I’m now wondering if the WalMart deal will actually tilt Nokia’s strategic calculations.

    Aaron Tras was right to point out that Walmart’s retail dominance in the U.S. makes it the natural partner for Nokia’s expertise at producing inexpensive phones in volume. If Nolia goes this route, in-house software development will look even more like an expense their pricing won’t support – especially, if as seems not unlikely, Walmart opens their side of the negotations with “And you’ll have an Android product for us, of course.”

    After all, WalMart is notorious for actively beating up on their supply chain to squeeze out costs. Why should Nokia be an exception?
    .

  8. >Its going to be much worse than the skinning crap fest on Android. Much worse.

    And why, exactly, would this tactic be immune to the market pressures that are putting the squeeze on skinning now?

    The “differentiate by fucking it up” game is a loser. Period. T-Mobile’s jaws are open for the next carrier to try it in a serious way.

  9. > T-Mobile’s jaws are open for the next carrier to try it in a serious way.

    Because, as you’ve pointed out, market share matters. In terms of customer base, T-Mobile (US) is less than half the size of AT&T, and Verizon is 20% larger than AT&T.

    Verizon has a 31.1% share of all cellular customers, compared to 25.2% for AT&T, roughly 12% for each for both T-Mobile and Sprint.

    T-Mobile can’t, Sprint can’t, AT&T doesn’t have a reason to (and can’t with iOS).

    Verizon could.

  10. > Verizon could.

    Moreover, Verizon will, because they want the dollars for all the data flowing.

  11. Note also that the Gassée piece you linked to is from last Summer.

    Here is today’s piece: http://www.mondaynote.com/2010/09/12/nokia’s-new-ceo-challenges/

    quoting:

    A bolder move, and perhaps more likely, is that Elop will embrace his old employer and position Nokia as the most notable Windows Phone 7 licensee.

    So when you said, “Like Piper Jaffray (and now me) he sees a move to Android as a strong possibility, but he raises another possibility.”

    that *other* possibility is seen as “more likely” by jlg.

  12. >Because, as you’ve pointed out, market share matters. In terms of customer base, T-Mobile (US) is less than half the size of AT&T, and Verizon is 20% larger than AT&T.

    And if Verizon wants to swap places with T-Mobile, then continuing to subtract value from its phones when T-Mobile isn’t doing so would be a speedy and efficient way to arrange that.

  13. > And if Verizon wants to swap places with T-Mobile, then continuing to subtract value from its phones when T-Mobile isn’t doing so would be a speedy and efficient way to arrange that.

    Microsoft is still very large.
    IBM is still very large.

    It takes phones and a network to start to build a carrier. Verizon has a first-class network. T-Mobile is catching up.

  14. I mean that unless that miracle has occurred Windows Phone 7 will be visibly broken

    I wouldn’t necessarily count that out. MS has shown a capability to light a fire under their development. I think its fair to say that all previous versions of windows mobile have been born into a market bereft of competition. MS simply does not make significant moves forward in that kind of environment.

    But now the vendors that once were windows mobile shops like samsung, LG and particularly HTC are now going Android. MS now isn’t just fighting to win, they’re fighting to have an entrant in the race.
    If i had to lay money, i’d say that Vista is ultimately responsible for their failure to hit this market. If they hadn’t had to focus on making Windows 7 something that people would actually upgrade to they would have had money to push to phone development.

    Don’t get me wrong, i’m not predicting a three person race with MS in the front pack. However I think that WM7 is going to be a lot closer in terms of power, usage and stability than past performance might suggest.

  15. Has any microsoft exec become the CEO of a company that needed a turnaround, and succeeded at turning said company around?

    Elop is no Lou Gerstner. Sell Nokia short.

  16. that *other* possibility is seen as “more likely” by jlg.

    perhaps more likely”.

    Personally I don’t see it if their complaint against Android is that Nokia will “lose control of their future”. At least with Android they’re a player within a co-op. WM7 doesn’t even have that going for it. I can’t think of a reason to not go with android that doesn’t apply even more to WM7. Is there one?

    The only possibility i can think of is support. And it’s not like MS has the best rep when it comes to supporting windows mobile.

  17. >I can’t think of a reason to not go with android that doesn’t apply even more to WM7. Is there one?

    I can’t think of any such reason either. With Android, Nokia could at least second developers to the team and have some input on the feature list and priorities. No way they’d get that with WM7.

  18. Some Guy:

    Gruber has suggested that lop bring in J Allard and Robbie Bach.

    > I can’t think of any such reason either.

    I can. Cash. Microsoft could *pay* Nokia to be the exclusive Windows Mobile 7 phone supplier for a period of time.

    Microsoft needs Nokia in order to re-establish against Android.
    Nokia needs Microsoft in order to be cash-flow positive in the short term.

    And Nokia has relationships with the carriers that HTC will never have.

  19. >Microsoft could *pay* Nokia to be the exclusive Windows Mobile 7 phone supplier for a period of time.

    This is nuts. I mean, it doesn’t stand up to five seconds of business-case analysis.

    First, Microsoft is not positioned to gain from such a move. It would make sense for them only if buying market share through Nokia now could induce a positive network effect that would enable them to collect monopoly rents later. And how’s that going to happen? There’s no smartphone equivalent of Word and Office in the offing, nothing that raises the value of MP7 phone proportionately to the number of other MP7 users, no magic hook. How do we know this? Because if there were, we’d have heard about it by it by now – even if Microsoft didn’t announce it publicly they’d have been touting it to investors , who aren’t stupid and know that without a magic hook any Microsoft smartphone is going to be roadkill with Android’s tireprints on it.

    Second, supposing MP7 has a magic hook that Microsoft haven’t revealed yet, the last thing you do in that situation is sign an exclusive with a single carrier. This is exactly the mistake Bill Gates didn’t make: he owned the PC hardware guys precisely because he negotiated a nonexclusive with the Nokia-equivalent IBM. The money went the other way, from the Nokia-equivalent to Microsoft, and Microsoft kept the freedom to flog their OS to everyone else.

  20. > The conditions under which carriers could get away with that crap are collapsing even as we speak.

    What conditions are those, Eric? That T-Mobile doesn’t fuck with Android? That they alone ship a pure Android 2.2?

    Get a clue, friend. As I and others have explained, T-Mobile doesn’t do this because they’re too small to get away with it. Why do T-Mobile and Sprint (both with around 12% of the current market) both setup companies like Best Buy and Walmart as MVNOs? Because they *have* to.

    Google won’t (or likely *can’t* due to Android being open source) stand-up to the carriers and demand a pure Android shipped on the phones. I can’t fathom a world where, say, Microsoft allowed this to happen, and we’ve already seen that Apple can (and does) stand-up to AT&T.

    I fully expect a T-Mobile iPhone early next year, and I expect T-Mobile to embrace same. The iPhone 4 does HSDPA / HDUPA in 850, 900, 1900 & 2100 MHz. T-Mobile runs HSDPA in AWS (1700MHz), so its going to take some re-engineering. Verizon will be in some serious trouble then.

  21. > This is nuts. I mean, it doesn’t stand up to five seconds of business-case analysis.

    Oh really? Want to explain why Dell took money (billions) from Intel to keep AMD CPUs out of the house?

    > First, Microsoft is not positioned to gain from such a move. It would make sense for them only if buying market share through Nokia now could induce a positive network effect that would enable them to collect monopoly rents later.

    Limited Period of Time. Perhaps a year, perhaps two.

    > There’s no smartphone equivalent of Word and Office in the offing

    Here, let me google that for you: http://en.wikipedia.org/wiki/Microsoft_Office_Mobile
    http://www.pcworld.com/businesscenter/article/170080/microsoft_nokia_team_to_put_office_apps_on_mobile_phones.html

    > the last thing you do in that situation is sign an exclusive with a single carrier.

    True, but Nokia is not a carrier, they’re make phones.

    However, you’ve touched on an important point.

    Nokia (with Siemens) also makes base stations. Perhaps you’re unaware how the big boys play at business, but
    the carriers are *very* sensitive to base station costs, which should make it straight-forward for Nokia to negotiate a ‘must take’ deal on a future smartphone running, say, Windows Mobile 7.

  22. >I fully expect a T-Mobile iPhone early next year, and I expect T-Mobile to embrace same.

    Can’t happen. The AT&T exclusive doesn’t expire until 2012. We know this from court filings.

  23. >What conditions are those, Eric?

    You know, when I write as much as I have about the things like (a) the effect of increasing hardware release tempos on the opportunity cost of skinning, and (b) NRE cost pressures due to plummeting price points, I expect even hypercritical assholes to show some comprehension of the argument.

  24. > opportunity cost of skinning given increasing hw release tempos

    Sorry? Microsoft did the skinning, if any. Nokia wouldn’t be re-skinning, and there is no way that Microsoft will allow the carriers that opportunity.

    > NRE cost pressures

    Microsoft is doing the engineering here, not Nokia

    Eric, please. I read what you write, but you appear to shoot from the hip in response. Your every retort appears to be a smoothed over version of “Any adverse opinion must be wrong!”

    You are expressly *NOT* the only smart guy in the room here.

  25. > Can’t happen. The AT&T exclusive doesn’t expire until 2012. We know this from court filings.

    We know that the **ORIGINAL** deal was for 5 years, starting in 2007. Have you forgotten that AT&T no longer offers iPhone customers an unlimited plan, or that several other terms have changed, some as far back as 2008?

    The terms of the contract have changed, Eric. Likely the exclusivity ends prior to 2012.

  26. >Oh really? Want to explain why Dell took money (billions) from Intel to keep AMD CPUs out of the house?

    Wrong case. You don’t need to show that Nokia would love to have the money. You need to show why Microsoft has any business reason to pay it. No, Office on the phone won’t do; it’s not a magic hook, unless we think there is huge pent-up demand to run it on a three-inch screen. Microsoft would need a killer app that creates positive externalities and fits the usage pattern of a smartphone.

    I’d actually be a bit worried about this possibility if Nokia or Microsoft were shipping a Redfly-like device. That might mean they were ready to push through to the scenario I described here, in which smartphones start to aggressively replace desktops. But that isn’t happening yet, and there’s no external sign that the prospect has entered either Nokia’s or Microsoft’s strategic planning.

  27. >Microsoft did the skinning, if any.

    Don’t change the subject. We were discussing why the conditions that prevent support Android skinning are collapsing.

  28. Afaics, it makes no difference these naive, religion-obfuscated analysis about price point, whether customers can re-use a device on another carrier, the relatively insignificant cost (vs. network infrastructure ROI) of crap infesting new versions of Android, etc.. The only consideration that matters is whether the carriers have an incentive to compete with each other. Successfully dis-intermediating carrier profit margins would encourage consolidation, thus unwinding the dis-intermediation. We can see this effect with Apple sharing the crap infestation revenue with AT&T, or with Android giving the carrier the capability to self-infest– two flavors of the same underlying economic poison. Google has no incentive to conquer the US carriers oligarchy, as long as the direction maximizes propagating Google search and ads every where.

    Afaics, the only way to permanently dis-intermediate network access economics (and this applies every kind of intermediary, including overzealous LAN policies, etc), is to re-focus on making the browser the OS and giving it the capacity for real-time user configuration. We need to dis-intermediate the OS. Linux was a great step forward for servers, but it is not what we need for the next step. I realize this won’t be a popular statement here, but the sooner we get on with this realization, the sooner we can solve the problem. I hope I am wrong, but I don’t yet see any convincing arguments.

  29. >Likely the exclusivity ends prior to 2012.

    I’ve already dealt with a couple of rounds of this wishful thinking several posts back in the smartphone series. Back before the iPhone 4 release I had Apple fanboys insisting to high heaven that Apple would ship a CDMA iPhone 4 through Verizon either at or shortly after release. I explained, patiently, that AT&T has every business incentive to hold Apple to the exclusive as long as it can.

    Sure, Apple would like to get out early, but there’s absolutely no sign it has succeeded. Remember Apple’s investors; they desperately want to hear that the ball and chain stapled to iPhone has been sawed off, and if that happens it’s going to leak. No leak, therefore no early release.

  30. >Gruber has suggested that lop bring in J Allard and Robbie Bach.

    I WISH!

    I’d cash in my whole portfolio, borrow every dime I could get my hands on, and buy all the one-year puts on NOK I could afford. It’s not often you get a trading signal like that.

    Sure would suck for the people who work there, though.

  31. This is nuts. I mean, it doesn’t stand up to five seconds of business-case analysis.

    You forget that MSFT has been rotting from the head for quite some time. Ballmer is definitely stupid enough to do it.

  32. Regarding iPhone and Verizon: http://daringfireball.net/2010/08/n92

    The article is about a month old and I haven’t seen anything more about it or related to it since. The gist is Gruber has some sources in Apple who’ve told him there is a CDMA iPhone 4 and it’s due to come out in January. He speculates with Verizon. His rationale is through rumors in the supply chain- particularly rumors that Apple has placed a large order with Qualcomm.

    Googling around for ‘n92′ only returns results where his article is sourced- so, apparently, he is the only guy who’s heard of this n92 codename. The article also doesn’t address anything regarding Apple’s deal with AT&T.

    The flipside is that, fanboy though he may be, he’s generally a pretty sober one and he seems to have a reputation for predicting Apple’s moves.

  33. And if Verizon wants to swap places with T-Mobile, then continuing to subtract value from its phones when T-Mobile isn’t doing so would be a speedy and efficient way to arrange that.

    That hasn’t stopped them in the past. Prior to Android, they RUINED pretty much every phone on their network, and were still the biggest. They have an absurdly loyal customer base, at least in the NY metro area. Many people I know actively get offended when their friends have a non-Verizon plan, because Vz to Vz calls are free. My mother-in-law is pissed that my wife and I decided to go with AT&T, because of the free calls thing — never mind that going with Verizon for smartphones would have cost us a total of $35/month more for our family plan.

    Losing to T-Mobile in some markets just ain’t going to happen, Eric, until their signal gets better. I used to be a T-Mobile customer, but it was just too unreliable in all the places I normally go. If T-Mobile wanted to spend a ton of cash and build their network, that would be different. Heck, I think one of the better ways is to install HSPA+ towers in every Walmart…

  34. FrancisT Says:
    > FWIW Walmart’s data plans are not looking too attractive

    I’m not sure I agree Francis (though thanks for the interesting link.) According to the link it is $40 for 1GB, not $40 per month. That is an important difference. It wouldn’t work for me, or I suspect most people here, but it is a pretty interesting data model. In their model you are paying for bits not rental. Your bits don’t expire. It is a further step toward commoditization.

    If you have low data usage, that is a significant difference. I don’t know what the typical usage is, and I agree that the price seems pretty high, but I did want to point out that it is a significantly different type of sale they are doing here.

  35. > But it turns out the price of LCDs was being held artificially high by collusion among major manufacturers; the ring got busted in early 2009, and lawsuits are continuing.

    This is interesting. Link please?

    ESR says: Googling for “LCD price fixing” gives good hits.

  36. @FrancisT and @JessicaBoxer:

    Never, ever, ever underestimate Walmart. They are an economic superpower all by themselves. If they wanted to, they could squash many companies others think of as “big” like a bug.

    Their game is what it always is: sell what lower-to-middle income families need and want most. As this demographic continues buying smartphones, especially Android phones, I think Walmart will be in this game, even if they aren’t in it much now. They might wait for the dust to settle, but I think in the last few years, Walmart has become far more aggressive than they used to be.

  37. @Morgan

    I don’t underestimate Walmart, I was just noting that the price seems high. Auchan here in France offers data for less, so do various people in the UK I believe

  38. > If T-Mobile wanted to spend a ton of cash and build their network, that would be different. Heck, I think one of the better ways is to install HSPA+ towers in every Walmart…

    I think that may have been one of the better business ideas I’ve heard. WalMart would have little problem being able to put those up. It’s already zoned commercial and they have lots of power/data connections coming in already. What would a valid complaint be? That a cell tower detracts from the aesthetic quality of the WalMart parking lot? T-Mobile gets most of their needs met and in exchange WalMart gets really discounted (possibly free) airtime to sell.

  39. @Aaron Traas: If T-Mobile wanted to spend a ton of cash and build their network, that would be different. Heck, I think one of the better ways is to install HSPA+ towers in every Walmart…

    Maybe. What are the technical logisitics, though?

  40. >Heck, I think one of the better ways is to install HSPA+ towers in every Walmart…

    Clever! That’d sure solve T-mobile’s out-of-metro-area problem, all right. Look at this map; they could put up 4,000 towers and cover the eastern half of the US and every metro area in the west like a blanket.

    Big-box buildings with good LOS to put the tower on top of, power, and net access…what more could a siting engineer want? Dang. If I were T-Mobile I’d have the installation trucks rolling now.

  41. >His rationale is through rumors in the supply chain- particularly rumors that Apple has placed a large order with Qualcomm.

    Doesn’t signify. I have a friend who does embedded software for Qualcomm; they’re in no way limited to shipping CDMA gear.

  42. > Doesn’t signify. I have a friend who does embedded software for Qualcomm; they’re in no way
    > limited to shipping CDMA gear.

    Further, building CDMA iPhones now does not necessarily mean immediate deployment to the US market. More likely it is in preparation for a big rollout overseas, with any CDMA release here being after the AT&T contract expires.

  43. >More likely it is in preparation for a big rollout overseas, with any CDMA release here being after the AT&T contract expires.

    That totally makes sense. CDMA runs a distant second to GSM outside the U.S., but it would still be a market worth addressing – 308 operators in 116 countries, according to Wikipedia.

  44. @esr/jsk
    >>More likely it is in preparation for a big rollout overseas, with any CDMA release here being after the AT&T contract expires.

    > That totally makes sense. CDMA runs a distant second to GSM outside the U.S., but it would still be a market worth addressing – 308 operators in 116 countries, according to Wikipedia.

    I’m fairly sure that most of those 116 countries are small – Korea may be one that isn’t, and I’m not sure about the status of the PRC whoch has been trying to push TDSCDMA as a ‘national standard’ and failing miserably according to some people I know. The vast majority of the world and the world’s carriers have gone on the GSM/UMTS/LTE path and I can’t see that changing just because the iphone is now available on CDMA as well as on UMTS

  45. I still think Apple are more interested in LTE than CDMA. If virtually all GSM and CDMA networks will be running LTE in 4G, then why not aim for an LTE iPhone in 2012 that is cross-network and breaks the AT&T monopoly all at once?

  46. “But you can’t polish a turd, and unless there’s been some sort of unprecedented miracle at Microsoft Windows Phone 7 is a turd.”

    Sure it is, but there is one thing MS is good at and this is integrating their products with each other which creates some synergies. There are lots of companies running an MS-only IT policy and if they get integration with, say, Exchange right, such as effortlessly entering new contacts on the phone without resorting to third-party products and having them automatically show up in Outlook the next time they are back in the office may be a big win. Take it one step further, some sort of automatic exchange of contact data between Windows phones and they’ve suddenly automated a very important aspect of the life of business people, the exchange of business cards – yes, there are other technologies that can do that but none of them are integrated well enough with Exchange, or even when they are getting supported for the whole chain by one company is essential for business people: if one company supports your whole process from said automatic business card exchange to Exchange syncing then all you have to do is to file one support case, if it is done through a third-party product then you have to figure out which party is at fault first… And factor in the prestige effect. See I’m getting .docx documents mailed to me all the time and not because it provides serious benefits over .doc but because it is a way of of showing off “see we are a succesful company, we could afford to upgrade our MSOffice”. If they get automatic business card exchange done business people will adopt it like crazy because it makes them look good on the eyes of the other guy.

    This might not sound like a big thing in the eyes of hackers and indeed it isn’t, it’s not going to change the world, it will be just a fad. But generating sales to “suit” type customers is something it can surely do.

    TL;DR MS has all sorts of advantages for that type of market where the people paying are not the same people who are using it, and where prestige is important.

  47. >Take it one step further, some sort of automatic exchange of contact data between Windows phones and they’ve suddenly automated a very important aspect of the life of business people, the exchange of business card

    OK, that would actually be a pretty good example of a magic hook generating positive externalities for the phone. For it to work, though, Microsoft would have to be using a proprietary interchange protocol (e.g, not vcard) with a patent lock on it. Otherwise there’d be interoperable Android and iPhone apps for that in about three seconds.

    You know, this shouldn’t be difficult to implement on a Bluetooth-enabled phone using vcard. How it should work: you fire the app, it hunts for Bluetooth offers from peers and displays a face gallery. Touch the face that matches the one in front of you and hey presto, contact swap.

    You probably want instances of the app to handshake so they don’t swap unless both parties touch face images within, say, 10 seconds of each other. That way users are protected against having their card info trawled.

  48. Take it one step further, some sort of automatic exchange of contact data between Windows phones and they’ve suddenly automated a very important aspect of the life of business people, the exchange of business card

    The weird thing is that it was one of the signature features of the Palm Pilot PDAs back in the day (over IR!), and it’s totally vanished since – not even any of the PalmOS phone do this, as far as I know.

  49. I do know of one reason for vendors to skin their phones – actual value, especially if Intellectual Property is attached. HTC and Palm purchased the Apple multi-touch Intellectual Property, so their phones have pinch and reverse pinch, unlike standard Android.

    Yours,
    Tom

  50. >HTC and Palm purchased the Apple multi-touch Intellectual Property, so their phones have pinch and reverse pinch, unlike standard Android.

    Stock Android 2.2 has those motions. I use them frequently to zoom and unzoom browser views.

  51. I can. Cash. Microsoft could *pay* Nokia to be the exclusive Windows Mobile 7 phone supplier for a period of time.

    Microsoft needs Nokia in order to re-establish against Android.
    Nokia needs Microsoft in order to be cash-flow positive in the short term.

    Thats somewhat plausible.
    The only question i’d have is, Is Nokia really that cash strapped? They may not be performing well in the US but as a global company they’re still a leading player in mobile phones.

    I’m not convinced that WM7 would be a beneficial long term move for Nokia but i’ll certainly grant that the kickback is definitely a reason to go WM7 that Android won’t share.

  52. “Heck, I think one of the better ways is to install HSPA+ towers in every Walmart…”

    Interesting idea. What’s the (very) approximate range of an averagely-sited HSPA tower? There’s probably a good Google search term that could tell me but I’m not coming up with it.

    I would never have thought of it, having pondered it for a moment now it seems like they’d be stupid not to do that.

  53. so their phones have pinch and reverse pinch, unlike standard Android.

    Stock Android has had “multi-touch” since 2.0.
    Because of one (or more)of IP issues, pig-headedness on the part of Andy Rubin (who doesn’t think much of “two handed operations”) or agreements between apple and google (depending on which blog post you read) it wasn’t implemented in Google applications until 2.1-update1.

  54. esr

    which way Nokia’s going to jump once it becomes apparent that its software strategy is a fragmented mess.

    It has been obvious to everyone at Nokia that it’s a mess for many years now, at least as far as the high-end smartphones are concerned. The thing is that up to now, Nokia has been making a lot of phones that are not powerful enough to run something like Android or Maemo, and Microsoft’s offerings have been known to be disastrously bad, at least until and probably including WM7. At the same time, putting out a lot of new models in rapid succession was seen as essential, so there really wasn’t much of an alternative to Symbian. It was the only thing that ran reasonably well on the hardware. That Symbian has a long and convoluted history and is crufty has been clear to everyone all along, but the OS has a fair amount of inertia with Nokia and its partners.

    Microsoft has spent a fair amount of effort in persuading Nokia to use their mobile OS in the past, and the answer has always been a resounding ‘no thanks’. As many have commented, the current state of the technologies should only make the ‘no’ more resounding, Elop or no Elop. Of course, the CEOs could go bananas and do it, but I highly doubt it. I agree with ESR’s assessment of what Nokia’s shareholder’s reaction would be. (The traditional Finnish way of dealing with the situation would be to take the person behind the sauna (a small separate building in the back of the yard because of the fire hazard) and shoot him in the back of the head. Then again, Nokia’s shareholders are mostly not Finnish these days.)

    Some Other Guy

    Nokia needs Microsoft in order to be cash-flow positive in the short term.

    No. Nokia is profitable and doesn’t have a cash-flow problem. Their operating profit for Q2 of 2010 was EUR 295 million, including special items.

  55. >It has been obvious to everyone at Nokia that it’s a mess for many years now, at least as far as the high-end smartphones are concerned.

    Yes. I’ve been wondering for years where they went off the rails. Nokia used to be a very smart, well-managed company with an uncanny knack for finding sweet spots in the cellphone design space and then pumping out millions of the things dirt-cheap. It’s easy to imagine a history in which they owned the #1 spot in smartphones, too. But their smartphone strategy and execution has been an unmitigated disaster – even when they came up with really interesting designs like N900 they botched the positioning and marketing completely. It is a puzzlement.

  56. Yes. I’ve been wondering for years where they went off the rails.

    I’m not sure that their user-facing software ever was on rails. They could get away with it so long as the phones were relatively simple and there was no Apple around to show how UIs were done, but take a look at the desktop software they ship for syncing with the phones. It’s always been pretty clunky. This is sort of doubly annoying because the physical design of their phones has almost always been good (not counting some god-ugly missteps in the low end phones a few years ago).

    Nokia did a lot of research early on about what advanced apps to put on the phones. They had games, positioning, television, music, web browsing and whatnot, but I guess being stuck with Symbian, not having whatever it is that’s needed for great user interfaces, and not having a clear idea of how to position all this stuff tripped them. I’m sure that there’s some dose of complacency in it, too, as they were doing quite well as it was. On the other hand, there seems to be the very opposite of complacency. I get the feeling that the quality of the software is underwhelming because of the frenetic pace of organizational changes within Nokia. I’m not an insider, but from what I’ve seen, it looks like the team that put together one product always gets disbanded and the people go to work who knows where within the organization. They’re very focused on getting the phone out, but not so much on long-term OS or software UI development.

  57. > Stock Android 2.2 has those motions. I use them frequently to zoom and unzoom browser views.

    Must have been looking at something older, but the point still stands.

    > Interesting idea. What’s the (very) approximate range of an averagely-sited HSPA tower? There’s probably a good Google search term that could tell me but I’m not coming up with it.

    I think it depends on the band.

    > I would never have thought of it, having pondered it for a moment now it seems like they’d be stupid not to do that.

    There’s spectrum expense and hardware expense. Building big nationwide networks is really costly. Think billions.

    Yours,
    Tom

  58. esr> even when they came up with really interesting designs like N900 they botched the positioning and marketing completely. It is a puzzlement.

    I suspect it is because the smartphone didn’t have priority relevance in their volume business, and probably due to some internal competition/politics within the company with respect to their core lines and demographics. Large companies typically only react once their market share drops.

  59. >The iPhone 4 is ranked lower than two Android phones.

    Just as significantly, the EVO 4G ranked above it is much less expensive. I think these rankings and prices explain Apple’s preciptous drop in new-unit share pretty neatly.

  60. @J. Jay:

    People are making wayyy too much out of the Nokia/Microsoft partnership. Symbian may be popular in Europe, but it’s far from popular in the North American and Asian markets. And the past of successes of Symbian will in no way translate to success if Nokia switches from Symbian or MeeGo or Maemo or QTopia or whatever its currently fractured schizoid strategy entails to a possible Windows 7 Mobile phone.

    Furthermore, MIcrosoft’s strategy in using its desktop monopoly to drive sales of its smartphone OS has been a failure to date and there is no reason whatsoever to believe that this will not continue to be the case.

  61. The iPhone 4 is ranked lower than two Android phones.

    Either of which I’ll be eligible for when it comes time to invoke my once-a-year phone upgrade! Booyaka!

    I has a geeklust for that Samsung Epic…

  62. But it turns out the price of LCDs was being held artificially high by collusion among major manufacturers

    Given the eternal cycle of collusion-fine-collusion-fine among RAM manufacturers it wasn’t much of a surprise. And there was that wave of relatively good-value computer monitors with a vertical resolution of 1050, which was a huge tell.

  63. Nokia’s QT is a very well designed software environment, and Meego is supposedly QT for a phone. So I don’t think you should count them out.

    QT is a high level C++ view of the operating system. From the developers point of view, when developing on QT on windows or Linux, QT is an OS that runs on top of a host OS, like Wine on Linux. Meego is, so far, wholly vaporware but it has a clean design, big backers, and nice prototypes.

  64. QT is a high level C++ view of the operating system. From the developers point of view, when developing on QT on windows or Linux, QT is an OS that runs on top of a host OS, like Wine on Linux.

    And this is relevant exactly how? QT is hardly the only such application framework.

    Meego is, so far, wholly vaporware but it has a clean design, big backers, and nice prototypes.

    Like esr, I’d love to be wrong about Meego. However, right now, Meego has zero market presence. Nokia has a lot of catching up to do if it expects to compete with Android and iPhone. Tech specs aren’t everything.

  65. http://daringfireball.net/2010/09/the_welcome_to_android

    Actually that article misses the truly interesting part of that story. The CDD stuff is the low level detail of a claim by Skyhook that Google strong-armed motorola into using Google’s (allegedly inferior) location technology over theirs using the CDD as an excuse.

    I’ll be interested to see what google’s side of the story is. This isn’t the first time that someone’s argued that Google has forced their business to disappear though in the one case i can think of off the top of my head, the commentators supported Google (the case in particular was claiming that google had given them the search death penalty because they feared competition. the comments ranged from “their site sucked. Google does not fear them” to “I’m glad google removes sites like that from their search results” to “examining the HTML of their site it’s no wonder they got no rank, they’ve broken fundamental rules of SEO”.).

    In terms of the actual article, Android is still completely open. However Android market requires a compatible device (where Google is certainly allowed to define what they mean by compatible in this case). Creating a competitor app market(with its own definition of compatible) is both plausible and has already occurred(which you know since you linked the article talking about it). The only change that i’d institute (if i were google) is that CDD applications are open, searchable and web-archiveable. So there’d be a link to a failed application giving google’s reasons why they think the device is incompatible.

  66. @JonB and @J Jay:

    Agreed. Google’s reasoning for the CDD is pretty simple and obvious: most of the applications in the market will be written to support Google’s standard Android APIs, including the gelocation aware stuff. If your device doesn’t support Google’s geolocation APIs, then your device won’t be able to use the large numbers of geolocation aware applications in the Android Market. By making sure that devices conform to a minimum set of functionality, most applications in the Market will work on most phones at the specified API levels. Anything else will result in horrible platform fragmentation.

    Note that this is specifically not the same as what Apple does with its App Store. Apple doesn’t have to address the multiple device vendor problem because, well, there’s only one device vendor for iOS, right?

  67. > the declining bill-of-materials cost on a smartphone will put a hard squeeze on the amount carriers
    > can afford to spend on software development

    It’s already beginning:

    http://newsroom.orange.co.uk/2010/09/21/orange-brings-android-to-the-masses-with-the-launch-of-san-francisco/

    “Available fully loaded with the easy-to-use Android 2.1 operating platform, the handset allows users to access thousands of great apps at their finger tips…”

    However,

    “including those specifically designed to offer customers a great Orange experience including Orange Wednesdays, Orange Maps”

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